Tesla Motors (NASDAQ:TSLA) trades at approximately 265 times its earnings. By comparison, Ford (NYSE:F) trades at 11 times its earnings; GM (NYSE:GM), 10 times earnings. Those numbers are there for all to see, but one blog post from an NYU professor has succeeded where many others have failed — he’s put doubt into the minds of Tesla investors, and it’s because he’s been right about overvalued stocks in the past.
Aswath Damodaran is a finance professor who lectures on valuation at NYU’s Stern School of Business. He also writes a blog in which he explores subjects from classes. In the past year, he has made the case of why it’s time to sell Facebook (NASDAQ:FB) and, most notably, that Apple’s (NASDAQ:AAPL) momentum was unsustainable. In the latter case, he made the call just prior to Apple’s shares plummeting amidst troubles in 2012.
Yet all roads lead to Tesla. Damodaran posted a blog on Wednesday, September 4, in which he reasoned Tesla was worth $67.12 per share. It took a few days for his humble, scholarly blog to reach investors, but observers are suggesting it was behind Tesla’s drop of 2 percent on Friday (Tesla was up 0.5 percent for the week). As can be expected, the backlash from Tesla bulls came fast and furious.
Damodaran merely hinted at the “vitriol” that headed his way following his Tesla valuation. Just to prove he wasn’t biased (he doesn’t hold Tesla stock), Damodaran decided to present a bull case for Tesla on Friday.
In his follow-up blog, Professor Damodaran laid out three ways through which Tesla could continue its charge: by becoming the definition of success in automobiles (“disruptor”); by setting the standard for batteries and electric motors; and by surpassing all others in charging infrastructure, thus becoming the de facto option in the electric vehicle industry.
Damodaran tries to assert he has no influence and shouldn’t be considered a “valuation guru.” His second post is a “no hard feelings” missive reflecting his academic bent. However, he made such a great call on Apple that investors are listening, and at least considering the possibility he may be right about Tesla, too.